Energy Transfer (ET), a leading master limited partnership (MLP), has experienced a notable decline in its unit price throughout the current year, diverging significantly from the broader market's upward trend. This downturn has, however, pushed its dividend yield to an appealing 7.7%, presenting a potentially attractive entry point for investors. While 2024 saw robust growth for the company, driven by strategic acquisitions and favorable market conditions, 2025 has been characterized by a deceleration. Nevertheless, several key factors suggest that Energy Transfer is on the cusp of a substantial turnaround, with projections indicating a strong recovery in its unit price in the coming quarters. This analysis delves into the primary drivers anticipated to fuel this resurgence, offering insights into the company's future trajectory.
Energy Transfer's financial performance in 2024 was marked by considerable strength, with adjusted EBITDA increasing by 13% and distributable cash flow rising by 10%. This impressive growth stemmed from a combination of significant acquisitions, such as Crestwood Equity Partners and WTG Midstream, alongside successful organic expansion initiatives and a buoyant energy market. However, 2025 has presented a different scenario, with adjusted EBITDA growth projected to be modest, falling at or below the lower end of its initial guidance. This slowdown is primarily attributed to a lack of major acquisitions this year, fewer organic projects reaching completion, and a general cooling in energy market conditions, particularly due to lower oil prices.
Despite the current year's subdued performance, the momentum for Energy Transfer is expected to shift dramatically, with a strong reacceleration anticipated from 2026 onwards. The company has committed to investing $5 billion in organic expansion projects this year, with several already entering commercial service, including new gas processing plants in the Permian Basin and the initial phase of its Nederland Flexport NGL expansion. By the close of next year, additional significant projects, such as another Permian gas processing plant, phase 1 of the Hugh Brinson Pipeline, and a new NGL fractionator at its Mont Belvieu complex, are slated to become operational. These substantial investments are poised to generate significant incremental income in 2026 and 2027, thereby catalyzing a rebound in the unit price.
Beyond the immediate horizon, Energy Transfer has a robust pipeline of projects planned through the end of the decade. These include phase 2 of the Hugh Brinson Pipeline in 2027, the Bethel storage expansion project in 2028, and the ambitious $5.3 billion Desert Southwest Expansion project in 2029. Furthermore, other expansion initiatives, such as the Lake Charles LNG project, are under development, promising to contribute to the company's long-term growth potential and further bolster its unit price.
Historically, strategic acquisitions have been a pivotal component of Energy Transfer's growth strategy. Since 2019, the company has completed several transformative deals, including the purchases of SemGroup, Enable Midstream, Crestwood Equity, and WTG Midstream, collectively contributing to a 10% compound annual adjusted EBITDA growth from 2020 to 2024. Looking forward, the MLP is well-positioned to continue this acquisition-driven growth. Energy Transfer's financial health is currently at its strongest, with a leverage ratio comfortably within its target range, providing substantial flexibility for future deals. A well-executed acquisition could significantly accelerate earnings growth and act as a powerful catalyst for a unit price recovery. Additionally, the company benefits from the acquisition activities of its affiliated MLPs, such as Sunoco LP's recent purchases of NuStar and Parkland, which indirectly boost Energy Transfer's earnings due to its substantial stake in Sunoco.
The convergence of reaccelerated growth from organic expansion projects and the strategic potential for further acquisitions positions Energy Transfer for a significant rebound. While the current year has seen a temporary slowdown in its growth trajectory, the forthcoming commercialization of major capital projects in 2026 and 2027, combined with the company's strong financial standing and propensity for accretive acquisitions, provides compelling reasons to anticipate a sharp recovery in its unit price. These dual growth engines are expected to drive improved financial performance, translating into a favorable outlook for investors in the coming periods.
